A few weeks back, an optimistic Apple told its investors that sales of the Apple Watch have exceeded its own internal expectations. A new report, however, begs to differ.
According to analyst Mark Li who works at Bernstein Research, it seems that a comment made by one of Apple’s suppliers has hinted that the Apple Watch might not be selling as well as it should, reports the Wall Street Journal. Bernstein Research is a subsidiary of Taiwanese firm Advanced Semiconductor Engineering (ASE) and is responsible for assembling the Apple Watch’s S1 system-in-package design.
“The shortfall of Apple Watch is a disappointment,” Li wrote in a research note. “We came in with a low expectation but below break-even still surprised us.”
However, it is unclear what role the ASE subsidiary, or ASE itself for that matter, plays in Apple’s supply chain. While many of Apple’s supply chain partners are well known, the intricate web of alliances — from smelters to chipmakers to assemblers and beyond — and inventory operations pose major obstacles to predicting sales with any accuracy. Apple CEO Tim Cook addressed the issue during the company’s most recent earnings call, warning analysts not to draw conclusions from supplier reports as such information is but a small part of a much larger picture.
According to the report, it seems that even shipping 2 million units a month to Apple did not even reach break-even volume. The firm also added that they do not expect to hit the break-even point in the third quarter ahead of the holidays, hinting that Apple isn’t ordering enough units, which in turn might hint at the lack of demand.
Apple refuses to break out Apple Watch sales numbers to prevent competitors from gaining unwanted operational insight, and instead lumps the wearable in with iPod, Apple TV, Beats hardware and accessories in an “Other” accounting category. Interestingly, the segment turned a profit for the first time last quarter, the first to include Apple Watch, jumping 56 percent sequentially.
Apple CEO Tim Cook, during Apple’s conference call for the third fiscal quarter of 2015, dispelled reports that Apple Watch sales collapsed after what appeared to be strong initial demand, saying shipments have held steady and actually peaked in June.